AIA reports strongindustry performance

 - November 3, 2006, 5:56 AM

Paced by Defense Department spending, U.S. aerospace industry sales rose 8 percent last year compared with 2003, an increase in sales of $12 billion.

Aerospace Industries Association (AIA) president and CEO John Douglass predicted last month that sales of American aerospace products will increase by another $12 to $15 billion this year. He added that every category–civil aircraft, related products, space, military aircraft and missiles– registered sales increases last year.

At the same time, industry profits reached an estimated $10 billion last year, their highest level in five years. “This has strong implications for us across the board,” said Douglass, “because it is from these profits that the future is derived as our industry invests in new products to carry us into the second half of the decade.”

Last year, the number of shipments of complete civil aircraft increased, but the value of those shipments did not. Despite slightly higher production of jetliners last year than in the previous year–up four to 285–transport revenues were projected to decline 1.1 percent, or about $200 million, to $21 billion.

General aviation billings, which had 100 more deliveries last year than in 2003, rose 1.2 percent to $6.2 billion. Civil helicopter sales surged from $366 million to $509 million, with manufacturers shipping 264 more aircraft during the year. Taken together, civil aircraft shipments increased by 368, while revenues decreased less than 1 percent to $27.5 billion. Civil aircraft sector sales, which include engines and parts, increased modestly to $35 billion.

Speaking to about 300 representatives from the media, industry and government at AIA’s 40th annual year-end review and forecast luncheon early last month, Douglass said President Bush should build on a solid aerospace track record in his second term.

“President Bush should be congratulated for developing a vision for aerospace in his first administration,” the AIA president said. “We plan to work closely with the administration to implement the vision in the second term.”

Douglass, who served as a member of the Commission on the Future of the U.S. Aerospace Industry, urged investment in the next-generation ATC system, which is now in the planning stages. He said both the White House and Congress have had a positive response to the commission’s recommendation to establish a Joint Planning and Development Office to redesign the national ATC system. It would bring together such disparate elements as weather from NOAA, Homeland Security operation screening and research and the DOD military airspace system. Using Defense Department technology can also help hold costs down, he added.

The U.S. aerospace industry generated $161 billion in sales last year, compared with $149 billion the year before. AIA forecasts that next year aerospace industry sales will jump to $173 billion, as the DOD’s aerospace purchases enter their seventh year of growth and commercial transport sales begin their recovery in earnest, according to David Napier, director of AIA’s Aerospace Research Center.

“These numbers [reveal] a healthy industry that continues to show strength and fortitude despite significant challenges in the last several years,” Douglass explained.

He told the group that foreign trade is another piece of good news. Exports are up and imports are down, he said, “so we are in a positive trade balance above $30 billion. Our best estimate is that we are at about $32 billion positive trade balance for last year, and we expect to see that continue to improve this year.”

One of the factors in the positive trade balance is the devalued dollar, which has made American products a bargain on the world market. “That bodes well for the future,” said Douglass. “Clearly this industry remains one of the few very bright spots in the American economy where American jobs are generating a positive trade balance.”

But Douglass warned that leaders must also smooth out a strained trade relationship with Europe concerning the ongoing dispute between the U.S. and EU over direct-launch aid subsidies provided to Airbus to develop new airliners.

The U.S. filed a petition with the World Trade Organization over the issue, which prompted a counterclaim from the EU and Douglass said that the two sides need to talk in good faith to reach a settlement.